CMA closes ‘leasehold’ investigation into Barratt without taking action

The competition regulator has closed its three-year investigation into alleged mis-selling of leasehold homes by the UK’s biggest housebuilder, Barratt, citing lack of evidence.

The Competition and Markets Authority (CMA) said in an investigation update published this morning on its website that it has “now closed its case”, after concluding that the evidence available was “insufficient to support a clear legal case for the CMA to secure collective redress for Barratt leaseholders under its consumer law powers”.

The decision will be seen as a victory for Barratt compared to rivals Taylor Wimpey, Countryside and Persimmon, all of whom were forced by the CMA to make formal undertaking to change their practices and deliver redress to their customers following parallel investigations into their practices.

The investigations followed a scandal which arose in 2016 over the selling of homes on a leasehold basis, many of which had onerous contract terms including some with doubling ground rent clauses that quickly rendered the properties unsellable. The CMA initially launched a probe in June 2019, before naming the four housebuilders as its targets in September 2020.

All of the housebuilders were accused of the mis-selling leasehold houses and flats, such as by using high-pressure sales tactics, failing to explain what ground rent was, failing to explain that properties could also be purchased on a freehold basis, or misleading buyers as to the cost of later converting the leasehold property to freehold.

Taylor Wimpey and Countryside were also additionally investigated for using potentially onerous contract terms in the sale of homes, and have undertaken to change their contracts and compensate affected customers.

The CMA said its decision regarding Barratt followed “careful scrutiny of the evidence gathered”, and that the probability of a successful legal case was “unlikely to change with further investigation and consequently continuing with the case would not be a good use of resources.”

It said: “Barratt’s sales practices have changed, and they no longer sell leasehold houses.”

Barratt issued a statement saying it was “pleased to note” the announcement of the closure of the investigation made by the CMA. It said: “Barratt has worked constructively with the CMA throughout. Barratt is committed to putting its customers first and has been awarded a 5 Star rating by its customers for 13 successive years, more than any other major housebuilder.”

However, campaigners for homebuyers were quick to raise concerns about the move, with the Twitter account for Colindale Cladding Victims branding the decision “Very weak”. It tweeted: “CMA statement does not exactly give confidence that Barratt did nothing wrong, so why let them off the hook?”